Credit Union Technical Advisory Committee (TAC) for Regulatory and Supervisory Initiatives
Date: July 31, 2023
Time: 11:00 am - 12:00 pm
Attendees: See Appendix A
The TAC for Credit Union Regulatory and Supervisory Initiatives meeting focused on the proposed Quality Assurance and Dispute Resolution Guidance that FSRA is in the process of developing.
Proposed Quality Assurance and Dispute Resolution Guidance
FSRA presented its rationale for developing Quality Assurance and Dispute Resolution Guidance for the credit union (“CU”) sector, noting that interest in a dispute resolution process came up when FSRA was developing its multiyear workplan for the CU sector. The Quality Assurance process is part of the Risk Based Supervisory Framework for Credit Unions (“RBSF-CU”) that is currently in place. FSRA presented highlights of the approach guidance to the members of the committee.
The Guidance would describe FSRA’s quality assurance processes and practices in determining a CU’s Overall Risk Rating (“ORR”) and Intervention Level (“IL”). This includes the following five levels of quality assurance:
- Level 1 - Assessment Team: Relationship Manager coordinates the assessment work to determine the preliminary ORR and IL of the CU.
- Level 2 – Director, CU Supervision: Director reviews work done by the assessment team including the working papers, approves the ratings and related documentation that provides rationale for the ratings. Once the comments and proposed changes have been addressed by the assessment team, the Director approves the ratings and related documentation that provides rationale for the ratings.
- Level 3 – Head, CU Prudential Supervision: Following Director-level approval, the Head of FSRA’s CU Prudential Supervision Department (“Head”) reviews, provides feedback to the Director and review team, and approves the ORR and IL once the comments and recommended changes have been addressed.
- Level 4 – Panel Review: FSRA may convene a panel of internal subject matter experts composed of independent (i.e., not part of the initial assessment) senior management staff to scrutinize and challenge the assessments to ensure the ratings are accurate and the RBSF-CU has been applied consistently across CUs. The panel will only approve the ORR and IL after the assessment team has addressed all of the panel’s feedback.
- Level 5 - Executive Vice President (EVP): At this level, the EVP CUIP reviews and ultimately approves the ORR and IL.
The Guidance would also describe the processes that CUs may follow if they disagree with how FSRA has assessed their ORR and IL as follows:
- The dispute resolution process would be available to a CU within 45 business days after receiving its Interim Supervisory Letter (“ISL”), which includes the ORR and IL.
- After the completion of a supervisory assessment, where a CU can establish that relevant information submitted by the CU was not considered or was incorrectly interpreted by FSRA, a CU would be able to access the dispute resolution process.
- It is proposed that the dispute resolution process would consist of the following steps:
- Write to the EVP CUIP to request a review of the ORR and IL. The CU would need to provide a detailed rationale and supporting documentation, where relevant.
- The EVP CUIP would review the rationale provided, investigate as required, and decide if a change is warranted.
- Upon making a decision, the EVP CUIP would communicate the decision in writing to the CU within 45 days of receiving the request.
- If the CU were to have reasonable grounds to dispute the EVP’s decision, then the CU could write a letter to the CEO of FSRA, requesting further review.
- The CEO of FSRA would investigate the dispute, if further review is warranted, take all necessary steps to understand the facts and circumstances, and provide a final decision to the CU, in writing, with respect to its ORR and IL.
Summary of questions and feedback
- A member asked if FSRA uses an internal review panel only for the medium-high-risk rated CUs or all CUs.
- FSRA stated that the internal review panel is only used when necessary based on complexity and risk rating.
- One member asked if all final ratings would go to the Executive Vice President (EVP), Credit Union, and Insurance Prudential (“CUIP”).
- FSRA stated that the EVP sees all the ratings before communicating to CUs through the ISL.
- A stakeholder asked if there would be a discussion about the preliminary findings after level 1 of the quality assurance process and before moving to level 2.
- FSRA responded that there would be discussion with the CU at the beginning of the process, as well as a meeting with CU officials to convey the observations of the supervisory risk assessment before the interim supervisory letter is issued.
- A member asked if the EVP would approve the ratings in cases where a review penal is not required.
- FSRA explained that the EVP would review all ratings before communicating to the CU through the ISL.
- One member asked about the timeline for the quality assurance process
- FSRA explained that the turn-around time would vary from CU to CU. However, FSRA expects that the process will be timely so that CUs can start looking at areas that have been identified. FSRA stated that it aims to bring transparency to the supervisory risk assessment process by engaging CUs on key issues.
- A member asked if there would be an opportunity to respond, provide additional material and at what point a CU would provide an action plan.
- FSRA stated that the supervisory assessment usually identifies issues on a continuum rather than a list of discrete actions. FSRA further noted that an action plan is not a yes/no decision but should lead to supervisory conversations. FSRA will continue to engage the CU while the action plan is being developed and implemented.
- A member asked about the possibility of providing a detailed action plan that FSRA can monitor and discuss with the CU.
- FSRA stated that such an action plan would be helpful, and it is willing to support the institutions through an ongoing supervisory conversation. FSRA indicated that there may be a pause in dialogue at some point so that the ISL can be finalized and shared, but supervisory ratings are subject to change based on the availability of material information once all the issues have been addressed.
- One member asked if the CUs will know when the review panel is being convened.
- FSRA indicated that it has not done so previously but that this could be considered.
- A member asked who would be involved in the assessment when a CU requests reconsideration of their ORR and/or IL, and what the investigation would look like.
- FSRA explained that it would be up to EVP to decide, depending on the issue being raised.
- Another member asked when the final guidance would be ready.
- FSRA plans to issue final guidance before the end of the fiscal year.
- A member asked if there are roles in these processes for FSRA’s Board.
- FSRA explained that these are operational processes, and the Board is not involved in routine operations, including supervisory activities.
FSRA will take the feedback from this meeting into consideration in drafting the guidance before releasing it for public consultation. FSRA plans to publish the proposed guidance for consultation in Fall 2023
Appendix A: Attendance record
|Allison Kasper||Copper Finance||A|
|Anita Saar||Northern Birch Credit Union||A|
|Olivier Lareau||Caisse Populaire Desjardins||A|
|José Gallant||Alterna Credit Union||A|
|Bhuwan Singla||DUCA Financial Credit Union||A|
|Maryse Gauvin||CP Alliance||A|
|Fahmeeda Merchant||DUCA Financial Credit Union||A|
|Luc Racette||CP Alliance||A|
|Sandy Ferguson||Mainstreet Credit Union||A|
|Riz Ahmad||DUCA Financial Credit Union||A|
|Shahab Syed||DUCA Financial Credit Union||A|
|John Pardalis||DUCA Financial Credit Union||A|
|Janine Dale||Libro Credit Union||A|
|Sodhi, Sunny||Meridian Credit Union||A|
|Angie Sorrenti||Northern Credit Union||A|